General Agreement on Tariffs

and Trade

Abrina, Cherry Ann Dieron, Kathlyn

Capiral, Lilu Marie Hji Simson, Kadidja
Corbe, Jemima Karing, Hamida
Talad, Mayrisa
OBJECTIVES

To provide equal opportunities to all countries in

international market market for trading.

To describe the purpose of GATT.

To explain the principle of GATT.

To help raise standards of living.

Definition

 The General Agreement on Tariffs and Trade is a legal agreement

between many countries, whose overall purpose was to promote
international trade by reducing or eliminating trade barriers such as
tariffs or quotas.
Basic Principles

 Although the WTO and the GATT are often described as enchancing
“free trade”, the system allows certain forms of protection. This is why,
more accuratel, one should speak of a system of rules dedicated to open,
fair and undistorted competition. Three main principles are thereby
binding for the member states when concluding above-mentioned
international arrangements.
Non-discrimination

The central principle of non-discrimination shall

prevent protectionist measures and trade among all
member states. It is designed to secure fair
conditions of trade.
Principle of National Treatment, Art.3.

This principle is supporting non-discrimination between the member states

and guarantees national compliance with the non-discrimination rule in
foreign trade. Therefore it prohibits unequal treatment of foreign imported
and locally-produced goods. The Agreement on Subsides and
Countervailing measures (SCM) is concretizing this basic principle as it
prohibits certain subsidies to companies contingent upon the use of
domestic over imported goods. If domestic companies is given an
advantage by the subsibes, the WTO members are authorized to take
countermeasures.
Liberalization through negotiation

 Although one important target of the GATT is to reduce tarrifs and

barriers substantially, it is not prohibiting any kind of custom tarrifs of
individual countries. By way of multilateral negotiations between the
member states ( for instance the so-called “Uruguay Round”, held in
Uruguay from from 1986 to 1994, from which emerged the WTO),
custom tariffs shall be lowered and made transparent. The individual
custom tariffsmare listed and cannot be raised unilaterally afterwards.
Connected to the process of liberalization, to the developing countries is
once more given a privilege as they have more time to fulfill their
obligations.
 What is the Purpose of
GATT?
The General Agreement on Tariffs and Trade (GATT) was
set up to eliminate protectionism, get countries trading
freely among themselves, and help restore economic
prosperity following the devastation of World War II.
Why was the GATT replaced by the World Trade
Organization (WTO)?

The GATT, though largely succesfull in its goal, was said to lack a
coherent institutional structure. In short, It was a legal agreement
acting as an international organization. The word trade organization
(WTO) incorporates the principles of the GATT and is better
positioned to carry them out because, among other things, it is better
versed in issues like intellectual property, has a faster dispute
settlement system, and wields more power.
DIFFERENCES BETWEEN GATT AND WTO
 GATT: Purpose, History, Pros, Cons
The General Agreement on Tariffs and Trade was the first
worldwide multilateral free trade agreement. It was in effect from
1948 until 1995. It was replaced by the World Trade Organization.

The purpose of GATT was to eliminate harmful

trade protectionism, which had contributed to
the Great Depression. GATT encouraged
international trade by removing tariffs on
goods.
GATT’s main provisions:
All its members must confer “most favored nation” status to each other.
That means all members must be treated equally when it comes to tariffs.
Developed countries eliminated tariffs on imports from developing
countries to help boost the latter’s economies.
Pros
Encourages international trade: The GATT reduced tariffs,
which boosted trade among countries. As they traded more
freely with each other, more countries saw the benefits of free
trade and wanted to join the agreement. By the time the GATT
was replaced by the WTO, more than 100 countries had joined
the original 23 signatories.
Reduces the likelihood of war: By increasing trade, the
GATT promoted world peace. It set the stage for the European
Union (EU). Despite the EU's problems, it has helped to prevent
wars among its members. The general idea is that, if your economy
depends on trade with another country, then you're less likely to go
to war with that county. The more countries trade with each other,
the less likely war becomes.
Improves communication: In addition to reducing the chances of
war, the GATT provided incentives for countries to better communicate
with one another. Even average citizens are more likely to learn a foreign
language these days, since it allows them to access larger consumer
markets than they have domestically. For instance, many people learn
English, the language of the world's largest consumer market, which
allows them to work for call centers for companies based in English-
language countries.
Cons
1.Domestic industries may struggle to compete: Low tariffs can
destroy some domestic industries, contributing to high
unemployment in those sectors. Governments with more money or
policy power can manipulate industries for their benefit more than
smaller countries can. A rich country can spend money subsidizing
industries to make them more competitive on a global scale.
2.Exposes more of the world to risks within a
given domestic industry: By the 1980s, the nature of
world trade had changed. The GATT did not address the trade of
services that allowed them to grow beyond a single country's
ability to manage them.
2.Governments cede some level of control to an international
agreement: Like other free trade agreements, the GATT reduced the
rights of a nation to rule its own people. The agreement required them
to change domestic laws in order to gain trade benefits.
THANK YOU !